CONDENSED INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 2017 AND FOR THE
THREE-MONTH PERIOD ENDED MARCH 31, 2017
PRESENTED IN COMPARATIVE FORM
Legal Information | 1 | |
Condensed Interim Statement of Financial Position | 2 | |
Condensed Interim Statement of Comprehensive Income | 4 | |
Condensed Interim Statement of Changes in Equity | 5 | |
Condensed Interim Statement of Cash Flows | 6 | |
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Notes to the Condensed Interim Financial Statements: |
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1 | | General information | 8 |
2 | | Regulatory framework | 9 |
3 | | Basis of preparation | 11 |
4 | | Accounting policies | 12 |
5 | | Financial risk management | 12 |
6 | | Critical accounting estimates and judgments | 14 |
7 | | Contingencies and lawsuits | 15 |
8 | | Property, plant and equipment | 16 |
9 | | Other receivables | 18 |
10 | | Trade receivables | 18 |
11 | | Financial assets at fair value through profit or loss | 19 |
12 | | Financial assets atamortized cost | 19 |
13 | | Cash and cash equivalents | 19 |
14 | | Share capital and additional paid-in capital | 20 |
15 | | Allocation of profits | 20 |
16 | | The Company’s Share-based Compensation Plan | 20 |
17 | | Trade payables | 21 |
18 | | Other payables | 21 |
19 | | Borrowings | 22 |
20 | | Salaries and social security taxes payable | 22 |
21 | | Income tax and tax on minimum presumed income / Deferred tax | 22 |
22 | | Tax liabilities | 24 |
23 | | Provisions | 24 |
24 | | Revenue from sales | 24 |
25 | | Expenses by nature | 25 |
26 | | Other operating expense, net | 26 |
27 | | Net financial expense | 26 |
28 | | Basic and diluted earnings (loss) per share | 27 |
29 | | Related-party transactions | 27 |
30 | | CTLL – EASA – IEASA Merger process | 28 |
31 | | Events after the reporting period | 29 |
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Additional information required by Section No. 12 (CNV) | 30 | |
Informative summary | 35 | |
Independent Auditors’ Report |
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Supervisory Committee’s Report |
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Glossary of Terms
The following definitions, which are not technical ones, will help readers understand some of the terms used in the text of the notes to the Company’s Condensed Interim Financial Statements.
Terms | Definitions |
CAMMESA | Compañía Administradora del Mercado Mayorista Eléctrico S.A. (the company in charge of the regulation and operation of the wholesale electricity market) |
CNV | National Securities Commission |
CSJN | Supreme Court of Justice of Argentina |
CTLL | Central Térmica Loma de la Lata S.A. |
EASA | Electricidad Argentina S.A. |
Edenor S.A | Empresa Distribuidora y Comercializadora Norte S.A. |
Edesur S.A | Empresa Distribuidora Sur S.A. |
ENRE | National Regulatory Authority for the Distribution of Electricity |
FOCEDE | Fund for Electric Power Distribution Expansion and Consolidation Works |
FOTAE | Trust for the Management of Electricity Power Transmission Works |
IAS | International Accounting Standards |
IASB | International Accounting Standards Board |
IEASA | IEASA S.A. |
IFRIC | International Financial Reporting Interpretations Committee |
IFRS | International Financial Reporting Standards |
MEyM | Energy and Mining Ministry |
MMC | Cost Monitoring Mechanism |
OSV | Orígenes Seguros de Vida S.A. |
PEN | Federal Executive Power |
PEPASA | Petrolera Pampa S.A. |
PESA | Pampa Energía S.A. |
PISA | Pampa Inversiones S.A. |
PYSSA | Préstamos y Servicios S.A. |
RTI | Tariff Structure Review |
SACME | S.A. Centro de Movimiento de Energía |
SE | Energy Secretariat |
SEGBA | Servicios Eléctricos del Gran Buenos Aires S.A. |
VAD | Distribution Added Value |
Legal Information
Corporate name:Empresa Distribuidora y Comercializadora Norte S.A.
Legal address:6363 Del Libertador Ave., City of Buenos Aires
Main business:Distribution and sale of electricity in the area and under the terms of the Concession Agreement by which this public service is regulated.
Date of registration with the Public Registry of Commerce:
- of the Articles of Incorporation: August 3, 1992
- of the last amendment to the By-laws: May 28, 2007
Term of the Corporation:August3, 2087
Registration number with the “Inspección General de Justicia” (the Argentine governmental regulatory agency of corporations):1,559,940
Parent company:Electricidad Argentina S.A. (EASA) – See Note 28
Legal address:Maipú 1, City of Buenos Aires
Main business of the parent company: Investment in Edenor S.A.’s Class “A” shares and rendering of technical advisory, management, sales, technology transfer and other services related to the distribution of electricity.
Interest held by the parent company in capital stock and votes:51.44%
CAPITAL STRUCTURE
AS OF MARCH 31, 2017
(amounts stated in pesos)
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Class of shares | Subscribed and paid-in | |
Common, book-entry shares, face value 1 and 1 vote per share | ||
Class A | 462,292,111 | |
Class B (1) | 442,210,385 | |
Class C (2) | 1,952,604 | |
906,455,100 |
(1) Includes 7,794,168 and 9,412,500 treasury shares as of March 31, 2017 and December 31, 2016, respectively.
(2) Relates to the Employee Stock Ownership Program Class C shares that have not been transferred.
1
Edenor S.A.
Condensed Interim Statement of Financial Position
as of March 31, 2017 presented in comparative form
(Stated in thousands of pesos)
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| Note |
| 03.31.17 | 12.31.16 | |
ASSETS |
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Non-current assets |
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Property, plant and equipment | 8 |
| 11,857,197 | 11,196,990 | |
Interest in joint ventures |
| 435 | 435 | ||
Deferred tax asset | 21 |
| 1,089,431 | 1,019,018 | |
Other receivables | 9 |
| 49,461 | 50,492 | |
Financial assets at amortized cost | 12 |
| - | 44,429 | |
Total non-current assets |
| 12,996,524 | 12,311,364 | ||
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Current assets |
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Inventories |
| 263,994 | 287,810 | ||
Other receivables | 9 |
| 180,944 | 179,308 | |
Trade receivables | 10 |
| 4,592,609 | 3,901,060 | |
Financial assets at fair value through profit or loss | 11 |
| 1,622,093 | 1,993,915 | |
Financial assets at amortized cost | 12 |
| 45,835 | 1,511 | |
Cash and cash equivalents | 13 |
| 68,660 | 258,562 | |
Total current assets |
| 6,774,135 | 6,622,166 | ||
TOTAL ASSETS |
| 19,770,659 | 18,933,530 |
2
Edenor S.A.
Condensed Interim Statement of Financial Position
as of March 31, 2017 presented in comparative form (continued)
(Stated in thousands of pesos)
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| Note |
| 03.31.17 | 12.31.16 | |
EQUITY |
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Share capital and reserve attributable to the owners of the Company |
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Share capital | 14 |
| 898,661 | 897,043 | |
Adjustment to share capital | 14 |
| 399,495 | 397,716 | |
Additional paid-in capital | 14 |
| 45,771 | 3,452 | |
Treasury stock | 14 |
| 7,794 | 9,412 | |
Adjustment to treasury stock | 14 |
| 8,568 | 10,347 | |
Legal reserve |
| 73,275 | 73,275 | ||
Opcional reserve |
| 176,061 | 176,061 | ||
Other reserve |
| - | 20,346 | ||
Other comprehensive loss |
| (37,172) | (37,172) | ||
Accumulated losses |
| (767,265) | (1,188,648) | ||
TOTAL EQUITY |
| 805,188 | 361,832 | ||
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LIABILITIES |
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Non-current liabilities |
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Trade payables | 17 |
| 236,642 | 232,912 | |
Other payables | 18 |
| 5,241,382 | 5,103,326 | |
Borrowings | 19 |
| 2,682,501 | 2,769,599 | |
Deferred revenue |
| 199,799 | 199,990 | ||
Salaries and social security payable | 20 |
| 99,574 | 94,317 | |
Benefit plans |
| 283,574 | 266,087 | ||
Tax payable | 21 |
| 305,522 | - | |
Tax liabilities | 22 |
| 369 | 680 | |
Provisions | 23 |
| 377,825 | 341,357 | |
Total non-current liabilities |
| 9,427,188 | 9,008,268 | ||
Current liabilities |
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Trade payables | 17 |
| 7,135,200 | 6,821,061 | |
Other payables | 18 |
| 143,616 | 134,759 | |
Borrowings | 19 |
| 118,190 | 53,684 | |
Deferred revenue |
| 764 | 764 | ||
Salaries and social security payable | 20 |
| 847,598 | 1,032,187 | |
Benefit plans |
| 33,372 | 33,370 | ||
Tax payable | 21 |
| 142,699 | 155,205 | |
Tax liabilities | 22 |
| 1,012,077 | 1,244,488 | |
Provisions | 23 |
| 104,767 | 87,912 | |
Total current liabilities |
| 9,538,283 | 9,563,430 | ||
TOTAL LIABILITIES |
| 18,965,471 | 18,571,698 | ||
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TOTAL LIABILITIES AND EQUITY |
| 19,770,659 | 18,933,530 |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
3
Edenor S.A.
Condensed Interim Statement ofComprehensive Income
for the three-month period endedMarch 31, 2017
presented in comparative form
(Stated in thousands of pesos)
three months at | |||||
Note | 03.31.17 |
| 03.31.16 | ||
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Revenue | 24 | 5,366,635 | 2,990,120 | ||
Electric power purchases | (2,533,581) | (1,317,315) | |||
Subtotal | 2,833,054 | 1,672,805 | |||
Transmission and distribution expenses | 25 | (1,047,849) | (1,324,825) | ||
Gross loss | 1,785,205 | 347,980 | |||
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Selling expenses | 25 | (498,629) | (288,008) | ||
Administrative expenses | 25 | (329,381) | (228,709) | ||
Other operating expense, net | 26 | (140,559) | (105,557) | ||
Operating profit/(loss) before income from provisional remedies, higer costs recognition and SE Resolution 32/15 | 816,636 | (274,294) | |||
Income recognition on account of the RTI - SE Resolution 32/15 | - | 431,047 | |||
Higher cost recognition – SE Resolution 250/13 and subsequent Notes | - | 81,512 | |||
Operating profit | 816,636 | 238,265 | |||
Financial income | 27 | 59,444 | 26,106 | ||
Financial expenses | 27 | (348,486) | (343,639) | ||
Other financial results | 27 | 128,898 | (133,190) | ||
Net financial expense | (160,144) | (450,723) | |||
Profit/(loss) before taxes | 656,492 | (212,458) | |||
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Income tax | 21 | (235,109) | 87,421 | ||
Profit/(loss) for the period | 421,383 | (125,037) | |||
Basic and diluted earnings profit/(loss) per share: | |||||
Basic and diluted earnings profit/(loss) per share | 28 | 0.47 | (0.14) |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
4
Edenor S.A.
Condensed Interim Statement ofChanges in Equity
for the three-month period endedMarch 31, 2017
presented in comparative form
(Stated in thousands of pesos)
Share capital | Adjustment to share capital | Treasury stock | Adjust- ment to treasury stock | Additional paid-in capital | Legal reserve | Opcional reserve | Other reserve | Other comprehesive | Accumulated deficit | Total equity | |||||||||||
Balance at December 31, 2015 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | - | - | - | (42,253) | 249,336 | 1,525,053 | ||||||||||
Loss for the three-month period | - | - | - | - | - | - | - | - | - | (125,037) | (125,037) | ||||||||||
Balance at December 31, 2016 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | - | - | - | (42,253) | 124,299 | 1,400,016 | ||||||||||
Ordinary and Extraordinary Shareholders’ Meeting held on 04.28.2016 | - | - | - | - | - | 73,275 | 176,061 | - | - | (249,336) | - | ||||||||||
Other reserve constitution - Share-bases compensation plan (Note 16) | - | - | - | - | - | - | - | 20,346 | - | - | 20,346 | ||||||||||
Loss for the nine-month complementary | - | - | - | - | - | - | - | - | (1,063,611) | (1,063,611) | |||||||||||
Other comprehensive results for the year | - | - | - | - | - | - | - | - | 5,081 | - | 5,081 | ||||||||||
Balance at December 31, 2016 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | 73,275 | 176,061 | 20,346 | (37,172) | (1,188,648) | 361,832 | ||||||||||
Increase of Other reserve constitution - Share-bases compensation plan (Note 16) | - | - | - | - | - | - | - | 21,973 | - | - | 21,973 | ||||||||||
Payment of Other reserve constitution - Share-bases compensation plan (Note 16) | 1,618 | 1,779 | (1,618) | (1,779) | 42,319 | - | - | (42,319) | - | - | - | ||||||||||
Profit for the three-month period | - | - | - | - | - | - | - | - | - | 421,383 | 421,383 | ||||||||||
Balance at March 31, 2017 | 898,661 | 399,495 | 7,794 | 8,568 | 45,771 | 73,275 | 176,061 | - | (37,172) | (767,265) | 805,188 |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
5
Edenor S.A.
Condensed Interim Statement ofCash Flows
for the three-month period endedMarch 31, 2017
presented in comparative form
(Stated in thousands of pesos)
three months at | |||||
Note | 03.31.17 |
| 03.31.16 | ||
Cash flows from operating activities | |||||
Profit (Loss) for the period | 421,383 | (125,037) | |||
Adjustments to reconcile net (loss) profit to net cash flows from operating activities: | |||||
Depreciation of property, plants and equipments | 25 | 97,474 | 81,929 | ||
Loss on disposals of property, plants and equipments | 2,693 | 1,003 | |||
Net accrued interest | 27 | 288,281 | 316,776 | ||
Exchange difference | 27 | (73,945) | 327,384 | ||
Income tax | 21 | 235,109 | (87,421) | ||
Allowance for the impairment of trade and other receivables, net of recovery | 25 | 50,373 | 10,681 | ||
Adjustment to present value of receivables | 27 | 74 | (289) | ||
Provision for contingencies | 66,270 | 60,093 | |||
Other expenses - FOCEDE | - | 13,975 | |||
Changes in fair value of financial assets | 27 | (58,250) | (198,760) | ||
Accrual of benefit plans | 25 | 25,170 | 20,643 | ||
Higher cost recognition – SE Resolution 250/13 and subsequent Notes | - | (81,512) | |||
Net gain from the repurchase of Corporate Bonds | 27 | - | (42) | ||
Income from non-reimbursable customer contributions | (191) | (191) | |||
Other reserve constitution - Share bases compensation plan | 16 | 21,973 | - | ||
Changes in operating assets and liabilities: | |||||
(Increase) in trade receivables | (699,073) | (1,399,856) | |||
Decrease in other receivables | 10,029 | 805,452 | |||
Decrease in inventories | 23,816 | 18,057 | |||
Increase in deferred revenue | - | 13,764 | |||
Increase in trade payables | 143,519 | 237,394 | |||
Decrease in salaries and social security payable | (179,333) | (152,645) | |||
Decrease in benefit plans | (7,682) | (8,811) | |||
(Decrease) Increase in tax liabilities | (246,316) | 103,572 | |||
Increase in other payables | 31,504 | 538,812 | |||
Decrease in provisions | 23 | (12,947) | (11,216) | ||
Net cash flows generated by operating activities | 139,931 | 483,755 |
6
Edenor S.A.
Condensed Interim Statement ofCash Flows
for the three-month period endedMarch 31, 2017
presented in comparative form (continued)
(Stated in thousands of pesos)
three months at | |||||
Note | 03.31.17 | 03.31.16 | |||
Cash flows from investing activities | |||||
Payment of property, plants and equipments | (742,941) | (427,961) | |||
Collection of Financial assets | 390,322 | 47,418 | |||
Payments of Financial assets | (546,518) | (41,662) | |||
Redemtion (Subscription) net of money market funds | 570,845 | (14,100) | |||
Collection of receivables from sale of subsidiaries | 1,606 | 1,962 | |||
Net cash flows used in investing activities | (326,686) | (434,343) | |||
Cash flows from financing activities | |||||
Payment of principal on loans | - | (4,475) | |||
Net cash flows (used in) / generated by financing activities | - | (4,475) | |||
(Decrease) Increase in cash and cash equivalents | (186,755) | 44,937 | |||
Cash and cash equivalents at the beginning of year | 13 | 258,562 | 128,952 | ||
Exchange differences in cash and cash equivalents | (3,147) | (2,613) | |||
(Decrease) Increase in cash and cash equivalents | (186,755) | 44,937 | |||
Cash and cash equivalents at the end of the period | 13 | 68,660 | 171,276 | ||
Supplemental cash flows information | |||||
Non-cash activities | |||||
Financial costs capitalized in property, plants and equipments | 8 | (65,077) | (61,653) | ||
Acquisitions of property, plant and equipment through increased trade payables | (158,112) | (139,168) |
The accompanying notes are an integral part of the Condensed Interim Financial Statements.
7
Nota 1 |General information
History and development of the Company
Edenor S.A. was organized on July 21, 1992 by Executive Order No. 714/92 in connection with the privatization and concession process of the distribution and sale of electric power carried out by SEGBA.
By means of an International Public Bidding, the PEN awarded 51% of the Company’s capital stock, represented by the Class "A" shares, to the bid made by EASA, the parent company of Edenor S.A. The award as well as the transfer contract were approved on August 24, 1992 by Executive Order No. 1,507/92 of the PEN.
On September 1, 1992, EASA took over the operations of Edenor S.A.
The corporate purpose of Edenor S.A. is to engage in the distribution and sale of electricity within the concession area. Furthermore, among other activities, the Company may subscribe or acquire shares of other electricity distribution companies, subject to the approval of the regulatory agency, assign the use of the network to provide electricity transmission or other voice, data and image transmission services, and render advisory, training, maintenance, consulting, and management services and know-how related to the distribution of electricity both in Argentina and abroad. These activities may be conducted directly by Edenor S.A. or through subsidiaries or related companies. In addition, the Company may act as trustee of trusts created under Argentine laws.
The Company’s economic and financial situation
In fiscal year 2016, the Company recorded, as it did in fiscal years 2012 and 2014, negative operating and net results, thus deteriorating once again its economic and financial situation, which had temporarily improved in fiscal year 2015 as a consequence of the issuance by the SE of Resolution No. 32/15, which addressed the need for the adjustment of the distribution companies’ resources and considered that the adoption of urgent and interim measures was necessary in order to maintain the normal provision of the public service, object of the concession.
This imbalance in the business equation was caused by the delay in the compliance with certain obligations under the Adjustment Agreement, especially with regard to both the recognition of the semiannual rate adjustments resulting from the MMC, and the carrying out of the RTI, mitigated by the adoption of certain interim measures.
In that regard, the Company has absorbed the higher costs associated with the provision of the service and complied with the execution of the investment plan and the carrying out of the essential operation and maintenance works that are necessary to maintain the provision of the public service in a satisfactory manner in terms of quality and safety, which, in a context of constant increase in the demand for electricity, has deteriorated the Company’s economic and financial equation over all these years.
As part of the measures aimed at the restructuring of the electricity sector, in January 2016, the MEyM issued Resolutions Nos. 6 and 7 and the ENRE its Resolution No. 1, which approved a new electricity rate system that reflected the new generation cost and sought to partially adjust the Distribution companies’ revenue in order for them to be able to cover their operating costs and make investments.
8
At the same time, the aforementioned MEyM Resolution No. 7/16 repealed SE Resolution No. 32/15, pursuant to which the government grant mentioned in the first paragraph of this Note had been granted, and instructed the ENRE to take all the necessary steps to conclude the RTI before December 31, 2016. In this regard, the ENRE issued the Resolution that approved the program for the Review of the distribution tariff, establishing the criteria and methodologies for the process. As a result, on October 28, 2016, the public hearing necessary to define the electricity rate schedule for the next period was held and the new electricity rate schedule, effective as from February 1, 2017, was issued by means of ENRE Resolution No. 63/17 (Note 2.a).
Considering the application of the RTI as from February 1, 2017, the Company’s Board of Directors is optimistic that the new electricity rates will result in the Company’s operating once again under a regulatory framework with clear and precise rules, which will make it possible not only to cover the operation costs, afford the investment plans and meet debt interest payments, but also to deal with the impact of the different variables that affect the Company’s business.
As of March 31, 2017, the result of operations for the three-month period amounts to $ 0.4 billion– profit-, whereas the working capital totals $ 2.8 billion – deficit-, which includes the amount owed to CAMMESA for $ 3.9 billion (principal plus interest accrued as of March 31, 2017). The Company has submitted a payment plan proposal based on its available and projected cash flows, in respect of which no reply from CAMMESA has been received at the date of issuance of these condensed interim financial statements.
Nota 2 |Regulatory framework
At the date of issuance of these condensed interim financial statements, the changes with respect to the situation reported by the Company as of December 31, 2016 are the following:
a) Tariff Structure Review
On January 31, 2017, the ENRE issued Resolution No. 63/17, pursuant to which it determined the definitive Electricity Rate Schedules, the review of costs, the required quality levels, and all the other rights and obligations that are to be applied and complied with by the Company as from February 1, 2017. The above-mentioned regulation was adapted by the ENRE by means of the issuance of Resolutions Nos. 81/17, 82/17, and 92/17, and Note No. 124,898.
The aforementioned Resolution states that the ENRE, as instructed by the MEyM, shall limit the increase in the VAD resulting from the RTI process and applicable as from February 1, 2017, to a maximum of 42%, as compared to the VAD in effect at the date of issuance of the aforementioned resolution, with the remaining value of the new VAD being applied in two stages, the first of them in November 2017 and the last one in February 2018. Additionally, the ENRE shall recognize and allow the Company to bill the VAD difference arising as a consequence of the gradual application of the tariff increase recognized in the RTI in 48 installments as from February 1, 2018, which will be incorporated into the VAD’s value resulting as of that date. As of March 31, 2017, the amount arising from the aforementioned limitation and not recognized by the Company in these condensed interim financial statements amounts approximately to $ 933.2 million.
9
Despite the previously described progress achieved with regard to the completion of the RTI process, at the date of issuance of these condensed interim financial statements, the definitive treatment to be given, by the MEyM, to all the issues resulting from the non-compliance with the Adjustment Agreement, including the remaining balances and other effects caused by the partial measures adopted, has yet to be defined.
These issues, among other, are the following:
i) the treatment to be given to the remaining balances of the amounts received for the fulfillment of the Investment Plan through the loans for consumption (mutuums) granted to cover the insufficiency of the funds deriving from the FOCEDE;
ii) the treatment to be given to the funds disbursed by the Company for the fulfillment of the Investment Plan, not included in i) above;
iii) the conditions for the settlement of the balance outstanding with CAMMESA at the date of issuance of SE Resolution No. 32/15, for which purpose the Company has submitted a payment plan;
iv) the treatment to be given to the Penalties and Discounts whose payment/crediting is pending.
Finally, on April 26, 2017 the Company was notified that the MEyM had provided that, once the RTI process is completed, the SE -with the participation of the Under-Secretariat for Tariff Policy Coordination- and the ENRE, shall determine in a term of 120 days whether any pending obligations exist until the effective date of the electricity rate schedules resulting from the RTI, and in connection with the Adjustment Agreement entered into on February 13, 2006. In such a case, the treatment to be given to those obligations shall also be determined.
b) Penalties
In addition to that which has been mentioned in note 2.c to the financial statements as of December 31, 2016, in relation to the control procedures, the service quality assessment methodologies, and the penalty system applicable as from February 1, 2017 for the 2017 – 2021 period set out by ENRE Resolution No. 63/17, the Regulatory Entity, by Note No. 125,248 dated March 29, 2017, set new penalty determination and adjustment mechanisms, providing for the following:
i) Penalty values shall be determined on the basis of the kwh value, the average electricity rate, the cost of energy not supplied or other economic parameter at the value in effect at the first day of the control period or the value in effect at the date of the penalizable event for penalties arising from specific events.
ii) For all the events that occurred during the transition period (the period between the signing of the Adjustment Agreement and the effective date of the RTI) for which a penalty has not been imposed, penalties shall be adjusted by the consumer price index (IPC) used by the Argentine Central Bank (BCRA) to produce the multilateral real exchange rate index (ITCRM) for the month prior to the end of the control period or that for the month prior to the date of occurrence of the penalizable event for penalties arising from specific events, until the date on which the penalty is imposed. This mechanism is also applicable to the concepts penalized after April 15, 2016 (ENRE Note No. 120,151) and until the effective date of the RTI. This adjustment will be part of the penalty principal amount.
iii) Unpaid penalties will accrue interest at the BNA lending rate for thirty-day discount transactions from the date of the resolution to the date of actual payment, as interest on late payment. In the case of penalties related to Customer service, the calculated amount shall be increased by 50%.
10
iv) Penalties subsequent to February 1, 2017 will be valued at the Kwh value or the cost of energy not supplied of the first day of the control period or of the day of occurrence of the penalizable event for penalties arising from specific events. Those concepts will not be adjusted by the IPC, applying the interest on late payment established in iii) above. Moreover, an additional fine equivalent to twice the amount of the penalty will be determined if payment is not made in due time and manner.
The impact of these new penalty determination and adjustment mechanisms have been quantified by the Company and recognized as of March 31, 2017.
c) Framework agreement
Due to the fact that at the date of these condensed interim financial statements the approvals of the new Framework Agreement for the January 1, 2015 - December 31, 2018 period by both the Federal and the Provincial Governments are still in process, no cumulative revenue has been recognized as of March 31, 2017 for $ 148.1 million.
Nota 3 |Basis of preparation
These condensed interim financial statements for the three-monthperiodended March 31, 2017 have been prepared in accordance withIFRS issued by the IASB and IFRIC interpretations, incorporated by the CNV.
This condensed interim financial information must be read together with the Company’s financial statements as of December 31, 2016, which have been prepared in accordance withIFRS. These condensed interim financial statements are stated in thousands of Argentine pesos, unless specifically indicated otherwise. They have been prepared under the historical cost convention, as modified by the measurement of financial assets at fair value through profit or loss.
The condensed interim financial statements for the three-monthperiodended March 31, 2017 have not been audited.The Company’s Management estimates that they include all the necessary adjustments to fairly present the results of operations for the period. The result of operations for the three-month period ended March 31, 2017 does not necessarily reflect the Company’s results in proportion to the full fiscal year.
Thesecondensed interimfinancial statements were approved for issue by the Company’s Board of Directors on May 10, 2017.
Comparative information
The balances as of December 31, 2016 and for the three-month period ended March 31, 2016, disclosed in these condensed interim financial statements for comparative purposes, arise from the financial statements as of those dates.
11
Nota 4 |Accounting policies
The accounting policies adopted for these condensed interim financial statements are consistent with those used in the preparation of the financial statements for the last financial year, which ended on December 31, 2016, except for those mentioned below.
There are no new IFRS or IFRIC applicable as from this period that have a material impact on the Company’s condensed interim financial statements.
These condensed interim financial statements must be read together with the audited financial statements as of December 31, 2016 prepared under IFRS.
Nota 4.1 | New accounting standards, amendments and interpretationsissued by the IASB
IAS 7 "Statement of cash flows": It was amended in January 2016. An entity is required to disclose information that will enable users of financial statements to understand changes in liabilities arising from financing activities. This includes changes arising from cash flows, such as drawdowns and repayments of borrowings; and non-cash changes, such as acquisitions, disposals and unrealized exchange differences. It is effective for annual periods beginning on or after January 1, 2017. The application of the amendments will have no impact on the Company’s results of operations or its financial position, it will only imply new disclosures.
IAS 12 “Income taxes”: It was amended in January 2016 to clarify the requirements for recognizing deferred tax assets on unrealized losses. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. The amendments also clarify other aspects related to the accounting for deferred tax assets. The amendments came into effect as from January 1, 2017. Those amendments have had no impact on the Company’s results of operations or its financial position.
Nota 5 |Financial risk management
Nota 5.1 | Financial risk factors
The Company’s activities and the market in which it operates expose the Company to a series of financial risks: market risk (including currency risk, cash flows interest rate risk, fair value interest rate risk and price risk), credit risk and liquidity risk.
There have been no significant changes in risk management policies since the last fiscal year end.
12
Market risks
i. Currency risk
As of March 31, 2017 and December 31, 2016, the Company’s balances in foreign currency are as follow:
Currency | Amount in foreign currency | Exchange rate (1) | Total | Total | ||||||
ASSETS |
| |||||||||
CURRENT ASSETS |
| |||||||||
Other receivables | USD | 6,169 | 15.290 | 94,324 | - | |||||
Cash and cash equivalents | USD | 235 | 15.290 | 3,593 | 161,753 | |||||
EUR | 12 | 16.313 | 196 | 200 | ||||||
TOTAL CURRENT ASSETS | 6,416 | 98,113 | 161,953 | |||||||
TOTAL ASSETS | 6,416 |
| 98,113 | 161,953 | ||||||
| ||||||||||
LIABILITIES |
| |||||||||
NON-CURRENT LIABILITIES |
| |||||||||
Borrowings | USD | 174,302 | 15.390 | 2,682,501 | 2,769,599 | |||||
TOTAL NON-CURRENT LIABILITIES | 174,302 |
| 2,682,501 | 2,769,599 | ||||||
CURRENT LIABILITIES |
| |||||||||
Trade payables | USD | 7,796 | 15.390 | 119,980 | 176,506 | |||||
EUR | 11 | 16.458 | 181 | 117 | ||||||
CHF | 30 | 15.378 | 461 | 469 | ||||||
NOK | 68 | 1.804 | 123 | 126 | ||||||
Borrowings | USD | 7,680 | 15.390 | 118,190 | 53,684 | |||||
TOTAL CURRENT LIABILITIES | 15,585 | 238,935 | 230,902 | |||||||
TOTAL LIABILITIES | 189,887 |
| 2,921,436 | 3,000,501 |
(1) The exchange rates used are the BNA exchange rates in effect as of March 31, 2017 for US Dollars (USD), Euros (EUR), Swiss Francs (CHF) and Norwegian Krones (NOK).
ii. Fair value estimate
The Company classifies the measurements of financial instruments at fair value using a fair value hierarchy that reflects the relevance of the variables used to carry out such measurements. The fair value hierarchy has the following levels:
·Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
·Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from the prices).
·Level 3: inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
13
The table below shows the Company’s financial assets measured at fair value as of March 31, 2017 and December 31, 2016:
LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |||||
At March 31, 2017 | ||||||||
Assets | ||||||||
Cash and cash equivalents | ||||||||
Money market funds | 25,628 | - | - | 25,628 | ||||
Financial assets at fair value through profit or loss: | ||||||||
Government bonds | 524,127 | - | - | 524,127 | ||||
Other receivables | 28,099 | - | - | 28,099 | ||||
Money market funds | 1,097,966 | - | - | 1,097,966 | ||||
Total assets | 1,675,820 | - | - | 1,675,820 | ||||
At December 31, 2016 | ||||||||
Assets | ||||||||
Cash and cash equivalents | ||||||||
Money market funds | 61,461 | - | - | 61,461 | ||||
Financial assets at fair value through profit or loss: | ||||||||
Government bonds | 387,279 | - | - | 387,279 | ||||
Other receivables | 28,839 | - | - | 28,839 | ||||
Money market funds | 1,606,636 | - | - | 1,606,636 | ||||
Total assets | 2,084,215 | - | - | 2,084,215 |
Nota 6 |Critical accounting estimates and judgments
The preparation of thecondensed interimfinancial statements requires the Company’s Management to make estimates and assessments concerning the future, exercise critical judgments and make assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities and revenues and expenses.
These estimates and judgments are permanently evaluated and are based upon past experience and other factors that are reasonable under the existing circumstances. Future actual results may differ from the estimates and assessments made at the date of preparation of these condensed interim financial statements.
Except for that mentioned in Note 2.b, in the preparation of these condensed interim financial statements, there have been no changes in either the critical judgments made by the Company when applying its accounting policies or the information sources of estimation uncertainty with respect to those applied in the financial statements for the year ended December 31, 2016.
14
Nota 7 |Contingencies and lawsuits
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company in the financial statements as of December 31, 2016, expect for the following:
The Company has become aware that on March 28, 2017 the Secretariat of the International Centre for Settlement of Investment Disputes (ICSID) informed through its website that it had registered the discontinuance of the arbitration proceeding commenced in August 2003 by EDF International and EASA, the majority shareholder and parent company of Edenor S.A., in relation to the latter’s failure to comply with the Concession Agreement, as a consequence of the passing of Law No. 25,561 on Economic Emergency and Foreign Exchange System Reform. The claimants’ waiver was a condition under the Company’s Agreement for the Renegotiation of the Concession Agreement (the “Adjustment Agreement”) that was to be fulfilled after the issuance of the electricity rate schedule resulting from the Tariff Structure Review, which was approved by means of ENRE Resolution No. 63/17 dated February 1, 2017 (Note 2.a).
15
Nota 8 |Property, plant and equipment
| Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment, communications and advances to suppliers | Construction in process | Supplies and spare parts | Total | ||||||||
At 12.31.16 | ||||||||||||||||
Cost | 235,709 | 2,048,014 | 6,024,954 | 2,523,084 | 1,265,502 | 3,040,451 | 162,088 | 15,299,802 | ||||||||
Accumulated depreciation | (69,097) | (617,062) | (2,119,167) | (907,145) | (390,341) | - | - | (4,102,812) | ||||||||
Net amount | 166,612 | 1,430,952 | 3,905,787 | 1,615,939 | 875,161 | 3,040,451 | 162,088 | 11,196,990 | ||||||||
Additions | - | - | - | - | 33,795 | 726,366 | 213 | 760,374 | ||||||||
Disposals | (145) | - | (1,878) | (670) | - | - | - | (2,693) | ||||||||
Transfers | 12,714 | 49,485 | 250,995 | 56,145 | (22,191) | (347,148) | - | - | ||||||||
Depreciation for the period | (3,956) | (13,518) | (37,890) | (20,172) | (21,938) | - | - | (97,474) | ||||||||
Net amount 03.31.17 | 175,225 | 1,466,919 | 4,117,014 | 1,651,242 | 864,827 | 3,419,669 | 162,301 | 11,857,197 | ||||||||
At 03.31.17 | ||||||||||||||||
Cost | 248,141 | 2,097,499 | 6,265,111 | 2,578,435 | 1,276,490 | 3,419,669 | 162,301 | 16,047,646 | ||||||||
Accumulated depreciation | (72,916) | (630,580) | (2,148,097) | (927,193) | (411,663) | - | - | (4,190,449) | ||||||||
Net amount | 175,225 | 1,466,919 | 4,117,014 | 1,651,242 | 864,827 | 3,419,669 | 162,301 | 11,857,197 |
· During the period ended March 31, 2017, direct costs capitalized amounted to $ 74.3 million.
· Financial costs capitalized for the period ended March 31, 2017 amounted to $ 65.1 million.
16
| Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment, communications and advances to suppliers | Construction in process | Supplies and spare parts | Total | ||||||||
At 12.31.15 | �� | |||||||||||||||
Cost | 202,381 | 1,674,336 | 4,809,485 | 2,232,104 | 1,254,245 | 2,512,113 | 188,602 | 12,873,266 | ||||||||
Accumulated depreciation | (56,376) | (576,740) | (2,054,733) | (839,389) | (460,239) | - | - | (3,987,477) | ||||||||
Net amount | 146,005 | 1,097,596 | 2,754,752 | 1,392,715 | 794,006 | 2,512,113 | 188,602 | 8,885,789 | ||||||||
Additions | - | - | 15 | 28 | 52,515 | 559,651 | 16,573 | 628,782 | ||||||||
Disposals | - | - | (405) | (598) | - | - | - | (1,003) | ||||||||
Transfers | 5,119 | 163,916 | 221,372 | 52,687 | 3,486 | (446,580) | - | - | ||||||||
Depreciation for the period | (2,784) | (11,505) | (29,308) | (17,801) | (20,531) | - | - | (81,929) | ||||||||
Net amount 03.31.16 | 148,340 | 1,250,007 | 2,946,426 | 1,427,031 | 829,476 | 2,625,184 | 205,175 | 9,431,639 | ||||||||
At 03.31.16 | ||||||||||||||||
Cost | 207,500 | 1,838,253 | 5,028,500 | 2,284,221 | 1,310,245 | 2,625,184 | 205,175 | 13,499,078 | ||||||||
Accumulated depreciation | (59,160) | (588,246) | (2,082,074) | (857,190) | (480,769) | - | - | (4,067,439) | ||||||||
Net amount | 148,340 | 1,250,007 | 2,946,426 | 1,427,031 | 829,476 | 2,625,184 | 205,175 | 9,431,639 | ||||||||
· During the period ended March 31, 2016, direct costs capitalized amounted to $ 69.2 million.
· Financial costs capitalized for the period ended March 31, 2016 amounted to $ 61.7 million.
17
Nota 9 |Other receivables
Note | 03.31.17 | 12.31.16 | |||
Non-current: | |||||
- | - | ||||
Financial credit | 42,030 | 43,636 | |||
Related parties | 29.d | 7,431 | 6,856 | ||
Total Non-current | 49,461 | 50,492 | |||
Current: | |||||
Prepaid expenses | 9,626 | 3,589 | |||
Advances to suppliers | 1,946 | 2,561 | |||
Advances to personnel | 765 | 1,701 | |||
Security deposits | 8,636 | 8,385 | |||
Financial credit | 39,721 | 40,461 | |||
Receivables from electric activities | 128,442 | 142,979 | |||
Related parties | 29.d | 766 | 766 | ||
Judicial deposits | 12,696 | 13,546 | |||
Other | 65 | 19 | |||
Allowance for the impairment of other receivables | (21,719) | (34,699) | |||
Total Current | 180,944 | 179,308 |
The carrying amount of the Company’s other financial receivables approximates their fair value.
The other non-current receivables are measured at amortized cost, which does not differ significantly from their fair value.
The roll forward of the allowance for the impairment of other receivables is as follows:
03.31.17 | 03.31.16 | ||||
Balance at beginning of year | 34,699 | 16,647 | |||
Increase | - | 1,812 | |||
Recovery | (12,980) | - | |||
Balance at end of the period | 21,719 | 18,459 |
Nota 10 |Trade receivables
03.31.17 | 12.31.16 | ||||
Current: | |||||
Sales of electricity - Billed | 2,265,157 | 2,522,265 | |||
Sales of electricity – Unbilled | 2,585,766 | 1,582,591 | |||
Framework Agreement | 10,938 | 10,938 | |||
Fee payable for the expansion of the transportation and others | 24,018 | 22,397 | |||
Receivables in litigation | 22,847 | 22,551 | |||
Allowance for the impairment of trade receivables | (316,117) | (259,682) | |||
Total Current | 4,592,609 | 3,901,060 | |||
The carrying amount of the Company’s trade receivables approximates their fair value.
The roll forward of the allowance for the impairment of trade receivables is as follows:
18
03.31.17 | 03.31.16 | ||||
Balance at beginning of year | 259,682 | 84,562 | |||
Increase | 63,353 | 8,869 | |||
Decrease | (6,918) | (10,398) | |||
Balance at end of the period | 316,117 | 83,033 |
Nota 11 |Financial assets at fair value through profit or loss
03.31.17 | 12.31.16 | ||||
Current | |||||
Government bonds | 524,127 | 387,279 | |||
Money market funds | 1,097,966 | 1,606,636 | |||
Total current | 1,622,093 | 1,993,915 |
Nota 12 |Financial assets at amortized cost
03.31.17 | 12.31.16 | ||||
Non-current | |||||
Government bonds | - | 44,429 | |||
Total Non-current | - | 44,429 | |||
Current | |||||
Government bonds | 45,835 | 1,511 | |||
Total Non-current | 45,835 | 1,511 |
Nota 13 |Cash and cash equivalents
03.31.17 | 12.31.16 | 03.31.16 | ||||
Cash and banks | 43,032 | 197,101 | 29,898 | |||
Money market funds | 25,628 | 61,461 | 141,378 | |||
Total cash and cash equivalents | 68,660 | 258,562 | 171,276 |
19
Nota 14 |Share capital and additional paid-in capital
Share capital | Additional paid-in capital | Total | ||||
Balance at December 31, 2015 | 1,314,518 | 3,452 | 1,317,970 | |||
Balance at December 31, 2016 | 1,314,518 | 3,452 | 1,317,970 | |||
Payment of Other reserve constitution - Share-bases compensation plan (Note 16) | - | 42,319 | 42,319 | |||
Balance at March 31, 2017 | 1,314,518 | 45,771 | 1,360,289 |
As of March 31, 2017, the Company’s share capital amounts to 906,455,100 shares, divided into 462,292,111 common, book-entry Class A shares with a par value of one peso each and the right to one vote per share; 442,210,385 common, book-entry Class B shares with a par value of one peso each and the right to one vote per share; and 1,952,604 common, book-entry Class C shares with a par value of one peso each and the right to one vote per share.
Section 206 – Business Organizations Law
As of December 31, 2016, the Company’s losses consumed the reserves and more than 50% of share capital, rendering the Company subject to compliance with the mandatory share capital reduction set forth in section 206 of the Business Organizations Law. However, the issuance of ENRE Resolution No. 63/17, setting a new electricity rate schedule for the Company for the five-year period beginning February 1, 2017 and ending January 31, 2022, resulted, at the closing date of these condensed interim financial statements, in the Company’s being no longer subject to complying with the previously described mandatory reduction. Furthermore, the financial position will largely depend on the development of the exchange rate, the collection of the debts accrued from the Framework Agreement for the Supply of Electricity to Shantytowns, and the level of energy losses, in respect of which strong recovery actions will be taken during the year.
Consequently, the Shareholders’ Meeting has resolved not to carry out the above-mentioned share capital reduction, deferring the decision and instructing the Board of Directors to assess the financial position in the quarters ending March 31, 2017 and June 30, 2017, and, should it be necessary, to call an Extraordinary Shareholders’ Meeting to deal with the issue (Note 31).
Nota 15 |Allocation of profits
Clause 7.4 of the Adjustment Agreement provided that during the Transition period the Company could not distribute dividends without the Regulatory Entity’s prior authorization. This transition period ended on January 31, 2017 with the implementation of the RTI, ENRE Resolution No. 63/17.
Therefore, in the Company’s opinion there exists no regulatory restriction on the distribution of dividends.
Nota 16 |The Company’s Share-based Compensation Plan
In the last months of fiscal year 2016, the Company’s Board of Directors proposed that the treasury shares be used for the implementation of a long-term incentive plan in favor of executive directors, managers or other personnel holding key executive positions in the Company in an employment relationship with the latter and those who in the future are invited to participate, underthe terms of section 67 of Law No. 26,831 on Capital Markets. The plan was ratified and approved by the ordinary and extraordinary shareholders’ meeting held on April 18, 2017 (Note 31).
20
At the date of issuance of these condensed interim financial statements, the Company awarded a total of 1,618,332 shares to executive directors and managers as additional remuneration for their performance in special processes developed during fiscal year 2016.
The fair value of the previously referred to shares at the award date, amounted to $ 42.3 million and has been recorded in the Salaries and social security taxes line item, with a contra account in Equity.
Nota 17 |Trade payables
03.31.17 | 12.31.16 | ||||
Non-current | |||||
Customer guarantees | 87,060 | 83,045 | |||
Customer contributions | 97,882 | 98,167 | |||
Funding contributions - substations | 51,700 | 51,700 | |||
Total Non-current | 236,642 | 232,912 | |||
Current | |||||
Payables for purchase of electricity - CAMMESA | 2,946,567 | 2,956,726 | |||
Provision for unbilled electricity purchases - CAMMESA (1) | 3,153,898 | 2,512,800 | |||
Suppliers | 840,333 | 958,460 | |||
Advance to customer (1) | - | 197,020 | |||
Customer contributions | 135,257 | 136,689 | |||
Discounts to customers | 37,372 | 37,372 | |||
Funding contributions - substations | 21,569 | 21,790 | |||
Related parties | 29.d | 204 | 204 | ||
Total Current | 7,135,200 | 6,821,061 |
The fair values of non-current customer contributions as of March 31, 2017 and December 31, 2016 amount to $ 129.5 million and $ 131.7 million, respectively. The fair values are determined based on estimated discounted cash flows in accordance with a market rate for this type of transactions. The fair value category applied thereto was Level 3 category.
The carrying amount of the rest of the financial liabilities included in the Company’s trade payables approximates their fair value.
Nota 18 |Other payables
21
Note | 03.31.17 | 12.31.16 | |||
Non-current | |||||
Loans (mutuum) with CAMMESA | 1,398,490 | 1,346,807 | |||
ENRE penalties and discounts | 3,565,827 | 3,477,351 | |||
Liability with FOTAE | 177,228 | 172,991 | |||
Payment agreements with ENRE | 99,837 | 106,177 | |||
Total Non-current | 5,241,382 | 5,103,326 | |||
Current | |||||
ENRE penalties and discounts | 56,164 | 56,164 | |||
Related parties | 29.d | 6,123 | 4,756 | ||
Advances for works to be performed | 13,575 | 13,575 | |||
Payment agreements with ENRE | 67,754 | 60,264 | |||
Total Current | 143,616 | 134,759 |
The carrying amount of the Company’s other financial payables approximates their fair value.
22
Nota 19 |Borrowings
Note | 03.31.17 | 12.31.16 | |||
Non-current | |||||
Corporate notes (1) | 2,682,501 | 2,769,599 | |||
Total non-current | 2,682,501 | 2,769,599 | |||
Current | |||||
Interest from corporate notes | 118,190 | 53,684 | |||
Total current | 118,190 | 53,684 |
(1) Net of debt repurchase/redemption and issuance expenses.
The fair values of the Company’s non-current borrowings (Corporate Notes) as of March 31, 2017 and December 31, 2016 amount approximately to $ 3 billion and $ 2.9 billion, respectively. Such values were calculated on the basis of the estimated market price of the Company’s Corporate Notes at the end of the period/year. The fair value category applied thereto was Level 1 category.
Nota 20 |Salaries and social security taxes payable
03.31.17 | 12.31.16 | |||
Non-current | ||||
Early retirements payable | 4,657 | 5,149 | ||
Seniority-based bonus | 94,917 | 89,168 | ||
Total non-current | 99,574 | 94,317 | ||
Current | ||||
Salaries payable and provisions | 634,853 | 912,275 | ||
Social security payable | 209,192 | 115,793 | ||
Early retirements payable | 3,553 | 4,119 | ||
Total current | 847,598 | 1,032,187 |
The carrying amount of the Company’s salaries and social security taxes payable approximates their fair value.
Nota 21 |Income tax and tax on minimum presumed income / Deferred tax
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company as of December 31, 2016, except for the following:
03.31.17 | 12.31.16 | |||
Non-current | ||||
Tax payable | 305,522 | - | ||
Total non-current | 305,522 | - | ||
Current | ||||
Tax payable | 243,666 | 243,666 | ||
Tax on minimum national income tax payable, net | (64,456) | (64,456) | ||
Tax withholdings | (36,511) | (24,005) | ||
Total current | 142,699 | 155,205 |
23
The detail of deferred tax assets and liabilities is as follows:
|
|
|
|
| 03.31.17 | 12.31.16 | |
Deferred tax assets |
|
|
|
Tax loss carryforward | 4,172 |
| 4,172 |
Inventories | 5,075 |
| 5,093 |
Trade receivables and other receivables | 172,071 |
| 138,816 |
Trade payables and other payables | 1,153,083 |
| 1,123,556 |
Salaries and social security taxes payable | 26,364 | 24,500 | |
Benefit plans | 110,931 | 104,810 | |
Tax liabilities | 16,515 | 15,734 | |
Provisions | 168,907 | 150,244 | |
Deferred tax asset | 1,657,118 |
| 1,566,925 |
|
|
| |
Deferred tax liabilities: |
|
|
|
Property, plant and equipment | (513,977) |
| (499,142) |
Financial assets at fair value through profit or loss | (45,627) |
| (40,351) |
Borrowings | (8,083) |
| (8,414) |
Deferred tax liability | (567,687) |
| (547,907) |
|
|
| |
Net deferred tax (liabilities) assets | 1,089,431 |
| 1,019,018 |
The detail of the income tax expense is as follows:
|
|
|
|
|
|
| 03.31.17 |
| 03.31.16 |
Deferred tax | 70,413 | 242,767 | ||
Current tax | (305,522) | (155,346) | ||
Income tax expense |
| (235,109) |
| 87,421 |
|
|
|
| |
|
|
|
| |
03.31.17 |
| 03.31.16 | ||
Profit (Loss) for the period before taxes |
| 656,492 |
| (212,458) |
Applicable tax rate |
| 35% |
| 35% |
(Loss) Profit for the period at the tax rate |
| (229,772) |
| 74,360 |
|
|
| ||
Non-taxable income | (5,337) | 13,061 | ||
Income tax expense | (235,109) | 87,421 |
24
Nota 22 |Tax liabilities
03.31.17 | 12.31.16 | |||
Non-current | ||||
Tax regularization plan | 369 | 680 | ||
Total Non-current | 369 | 680 | ||
Current | ||||
Provincial, municipal and federal contributions and taxes | 527,487 | 377,430 | ||
VAT payable | 354,763 | 725,553 | ||
Tax withholdings | 55,901 | 78,909 | ||
SUSS withholdings | 1,929 | 2,785 | ||
Municipal taxes | 69,992 | 57,832 | ||
Tax regularization plan | 2,005 | 1,979 | ||
Total Current | 1,012,077 | 1,970,041 |
Nota 23 |Provisions
Non-current liabilities | Current liabilities | |||
Contingencies | ||||
At 12.31.16 | 341,357 | 87,912 | ||
Increases | 36,472 | 29,798 | ||
Decreases | (4) | (12,943) | ||
At 03.31.17 | 377,825 | 104,767 | ||
At 12.31.15 | 259,573 | 70,489 | ||
Increases | 21,556 | 38,537 | ||
Decreases | (3) | (11,213) | ||
At 03.31.16 | 281,126 | 97,813 |
Nota 24 |Revenue from sales
03.31.17 |
| 03.31.16 | ||
Sales of electricity (1) | 5,332,301 | 2,965,534 | ||
Right of use on poles | 28,135 | 22,855 | ||
Connection charges | 5,725 | 1,509 | ||
Reconnection charges | 474 | 222 | ||
Total Revenue from sales | 5,366,635 | 2,990,120 |
(1)Includes revenue from the application of ENRE Resolution No. 347/12 for $ 148.5 million and $ 274.4 million for the periods ended March 31, 2017 and 2016, respectively.
25
Nota 25 |Expenses by nature
The detail of expenses by nature is as follows:
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 768,857 | 131,174 | 141,479 | 1,041,510 | ||||
Pension plans | 18,581 | 3,170 | 3,419 | 25,170 | ||||
Communications expenses | 5,509 | 41,418 | 3,074 | 50,001 | ||||
Allowance for the impairment of trade and other receivables | - | 50,373 | - | 50,373 | ||||
Supplies consumption | 49,689 | - | 10,718 | 60,407 | ||||
Leases and insurance | 104 | - | 24,665 | 24,769 | ||||
Security service | 17,632 | 184 | 19,135 | 36,951 | ||||
Fees and remuneration for services | 148,835 | 114,796 | 108,377 | 372,008 | ||||
Public relations and marketing | - | - | 3,766 | 3,766 | ||||
Advertising and sponsorship | - | - | 1,940 | 1,940 | ||||
Reimbursements to personnel | 6 | 5 | 149 | 160 | ||||
Depreciation of property, plants and | 80,226 | 12,674 | 4,574 | 97,474 | ||||
Directors and Supervisory Committee | - | - | 2,920 | 2,920 | ||||
ENRE penalties (1) | (41,683) | 90,054 | - | 48,371 | ||||
Taxes and charges | - | 54,761 | 4,568 | 59,329 | ||||
Other | 93 | 20 | 597 | 710 | ||||
At 03.31.17 | 1,047,849 | 498,629 | 329,381 | 1,875,859 |
(1) Transmission and distribution expenses include recovery for $ 413.7 million (Note 2.b) net of the charge for the period for $ 372 million
The expenses included in the chart above are net of the Company’s own expenses capitalized in Property, plant and equipment as of March 31, 2017 for $ 74.3 million.
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 542,701 | 83,974 | 86,221 | 712,896 | ||||
Pension plans | 15,715 | 2,432 | 2,496 | 20,643 | ||||
Communications expenses | 6,548 | 16,434 | 870 | 23,852 | ||||
Allowance for the impairment of trade and other receivables | - | 10,681 | - | 10,681 | ||||
Supplies consumption | 70,268 | - | 8,924 | 79,192 | ||||
Leases and insurance | 116 | - | 19,631 | 19,747 | ||||
Security service | 2,653 | 129 | 26,829 | 29,611 | ||||
Fees and remuneration for services | 94,318 | 87,500 | 69,134 | 250,952 | ||||
Public relations and marketing | - | - | 2,789 | 2,789 | ||||
Advertising and sponsorship | - | - | 1,437 | 1,437 | ||||
Reimbursements to personnel | 248 | 48 | 131 | 427 | ||||
Depreciation of property, plants and | 65,454 | 12,422 | 4,053 | 81,929 | ||||
Directors and Supervisory Committee | - | - | 1,320 | 1,320 | ||||
ENRE penalties | 526,691 | 58,728 | - | 585,419 | ||||
Taxes and charges | - | 15,633 | 3,107 | 18,740 | ||||
Other | 113 | 27 | 1,767 | 1,907 | ||||
At 03.31.16 | 1,324,825 | 288,008 | 228,709 | 1,841,542 |
The expenses included in the chart above are net of the Company’s own expenses capitalized in Property, plant and equipment as of March 31, 2016 for $ 69.2 million.
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Nota 26 |Other operating expense, net
03.31.17 | 03.31.16 | |||
Other operating income | ||||
Services provided to third parties | 12,962 | 7,122 | ||
Commissions on municipal taxes collection | 9,261 | 4,129 | ||
Related parties | 29.a | 685 | - | |
Income from non-reimbursable customer | 191 | 191 | ||
Others | 279 | 2,128 | ||
Total other operating income | 23,378 | 13,570 | ||
Other operating expense | ||||
Net expense from technical services | (6,467) | (4,761) | ||
Gratifications for services | (12,029) | (6,417) | ||
Cost for services provided to third parties | (3,656) | (3,346) | ||
Severance paid | (3,556) | (4,598) | ||
Debit and Credit Tax | (66,241) | (24,817) | ||
Other expenses - FOCEDE | - | (13,975) | ||
Provision for contingencies | (66,270) | (60,093) | ||
Disposals of property, plant and equipment | (2,693) | (1,003) | ||
Other | (3,025) | (117) | ||
Total other operating expense | (163,937) | (119,127) | ||
Other operating expense, net | (140,559) | (105,557) |
Nota 27 |Net financial expense
03.31.17 |
| 03.31.16 | ||
Financial income |
| |||
Commercial interest | 29,750 | 17,655 | ||
Financial interest | 29,694 | 8,451 | ||
Total financial income | 59,444 | 26,106 | ||
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Financial expenses |
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Interest and other (1) | (112,146) | (93,691) | ||
Fiscal interest | (1,089) | (1,073) | ||
Commercial interest | (234,490) | (248,118) | ||
Bank fees and expenses | (761) | (757) | ||
Total financial expenses | (348,486) | (343,639) | ||
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Other financial results | ||||
Exchange differences | 73,945 | (327,384) | ||
Adjustment to present value of receivables | (74) | 289 | ||
Changes in fair value of financial assets (2) | 64,828 | 202,738 | ||
Net gain from the repurchase of | - | 42 | ||
Other financial expense | (9,801) | (8,875) | ||
Total other financial expense | 128,898 | (133,190) | ||
Total net financial expense | (160,144) | (450,723) |
(1) Net of interest capitalized as of March 31, 2017 and 2016 for $ 65.1 million and $ 61.7 million, respectively.
(2) Includes changes in the fair value of financial assets on cash equivalents as of March 31, 2017 and 2016 for $ 6.6 million and $ 3.9 million, respectively.
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Nota 28 |Basic and diluted earnings (loss) per share
Basic
The basic earnings (loss) per share are calculated by dividing the profit/(loss) attributable to the holders of the Company’s equity instruments by the weighted average number of common shares outstanding as of March 31, 2017 and 2016, excluding common shares purchased by the Company and held as treasury shares.
The basic earnings (loss) per share coincide with the diluted earnings (loss) per share, inasmuch as the Company has issued neither preferred shares nor corporate notes convertible into common shares.
03.31.17 | 03.31.16 | |||
Profit (Loss) for the period attributable to the owners of the Company | 421,383 | (125,037) | ||
Weighted average number of common shares outstanding | 897,115 | 897,043 | ||
Basic and diluted profit (loss) earnings per share – in pesos | 0.47 | (0.14) |
Nota 29 |Related-party transactions
· The following transactions were carried out with related parties:
a. Income
Company | Concept | 03.31.17 | 03.31.16 | |||
PAMPA | Electrical assembly service | 685 | - | |||
685 | - |
b. Expense
| ||||||
Company | Concept | 03.31.17 | 03.31.16 | |||
| ||||||
EASA (Note 30) | Technical advisory services on financial matters | (9,801) | (8,861) | |||
SACME | Operation and oversight of the electric power transmission system | (13,021) | (8,529) | |||
Salaverri, Dellatorre, Burgio y Wetzler Malbran | Legal fees | (101) | (3,454) | |||
PYSSA | Financial and granting of loan services to customers | - | (13) | |||
OSV | Hiring life insurance for staff | (3,333) | (579) | |||
PISA | Interest Corporate Notes 2022 | - | (3,573) | |||
| (26,256) | (25,009) |
c. Key Management personnel’s remuneration
| ||||
03.31.17 | 03.31.16 | |||
Salaries |
| 45,051 | 40,536 | |
| 45,051 | 40,536 |
28
· The balances with related parties are as follow:
d. Receivables and payables
| 03.31.17 | 12.31.16 | ||
Other receivables - Non current | ||||
SACME | 7,431 | 6,856 | ||
| 7,431 | 6,856 | ||
Other receivables - Current | ||||
SACME | 766 | 766 | ||
766 | 766 | |||
Trade payables |
| |||
PYSSA |
| (204) | (204) | |
| (204) | (204) | ||
| ||||
Other payables | ||||
SACME | (6,123) | (4,756) | ||
(6,123) | (4,756) |
Nota 30 | CTLL - EASA – IEASA Merger process
The Company has been informed that the Board of Directors of EASA, the parent company, at its meeting of March 29, 2017 approved, subject to the approval of both the respective shareholders’ meetings and the control authorities, the merger of EASA and IEASA (the latter being EASA’s majority shareholder) as the acquired companies, which will be dissolved without liquidation, with and into CTLL, as the acquiring and surviving company.
Furthermore, the Preliminary Merger Agreement and the Consolidated Merger Statement of Financial Position have been approved. It must be pointed out that CTLL, the acquiring and surviving company, as well as EASA and IEASA, the acquired companies, belong to the same control group inasmuch as Pampa Energía is the direct and/or indirect controlling shareholder of all of them.
In compliance with applicable regulations, on March 30, 2017 the Company and EASA informed the ENRE and requested its authorization.
At the date of issuance of these condensed interim financial statements, the process is still pending definition by the Regulatory entities.
29
Nota 31 | Events after the reporting period
Ordinary and Extraordinary Shareholders’ Meeting
The Company Ordinary and Extraordinary Shareholders’ Meeting held on April 18, 2017 resolved, among other issues, the following:
- To approve Edenor S.A.’s Annual Report and Financial Statements of as of December 31, 2016;
- To approve the actions taken by the Directors and Supervisory Committee members, together with the remuneration thereof;
- To appoint the authorities and the external auditors for the current fiscal year;
- To approve the use of the treasury shares for the implementation of the long-term incentive plan in favor of certain key personnel (Note 16);
- Not to carry out the share capital reduction, deferring it and instructing the Board of Directors to call an Extraordinary Shareholders’ Meeting in order to deal with this issue if, as a consequence of the results of operations for the quarters ending March 31 and June 30, 2017, the Company continued to be subject to complying with the mandatory share capital reduction (Note 14).
Regulatory framework – Bill on electricity dependent patients
On April 26, 2017, the Senate unanimously approved a bill originally drafted by the House of Representatives, whose purpose is to guarantee the permanent and free of charge supply of electricity to those individuals who qualify as dependent on power for reasons of health and require medical equipment necessary to avoid risks in their lives or health. The bill provides that the account holder of the service or someone who lives with him/her (a cohabitant) that is registered as “Electricity dependent for reasons of health” will be exempt from the payment of all and every connection fee and will benefit from a special free of charge tariff treatment in the electric power supply service under national jurisdiction, which consists in the recognition of the entire amount of the power bill. For such purpose, the bill provides that Federal Executive Power will make the necessary budget allocations. Additionally, the bill states that the distribution company will, upon request, provide the account holder of the service or a cohabitant that is registered as Electricity dependent for reasons of health with a power generator or the appropriate equipment free of charge, including the costs associated with the operation thereof, capable of providing the electric power necessary to satisfy the operation of the medical equipment. At the date of issuance of these condensed interim financial statements, the bill has been neither passed nor rejected, in whole or in part, by the Federal Executive Power.
RICARDO TORRES |
Chairman
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30
Free translation from the original in Spanish for publication in Argentina
REPORT OF CONDENSED INTERIM FINANCIAL STATEMENTS´REVIEW
To the Shareholders, President and Directors
Empresa Distribuidora y Comercializadora Norte
Sociedad Anónima (Edenor S.A.)
Legal address: Avenida del Libertador 6363
Autonomous City of Buenos Aires
Tax Code No. 30-65511620-2
Introduction
We have reviewed the condensed interim financial statements of Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.) (hereinafter “Edenor S.A.” or “the Company”) which includes the condensed interim statement of financialposition as of March 31, 2017, the related condensed interim statement of comprehensive income for the three months period ended March 31, 2017, the related condensed interim statements of changes in equity and cash flows for the three months period then ended with the complementary selected notes.
The amounts and other information related to fiscal year 2016 and its interim periods, are part of the financial statements mention above and therefore should be considered in relation to those financial statements.
Directors´ responsibility
Company´s Board of Directors is responsible of preparation and presentation of the financial statements, in accordance with the International Financial Reporting Standards (IFRS) adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) ,as the applicable accounting framework and incorporated by the National Securities Commission (CNV), as they were approved by the International Accounting Standards Board (IASB), and, therefore, it’s responsible for the preparation and issuance of the condensed interim financial statements mentioned infirst paragraph in accordance with IAS 34 “Interim financial information”.
DC0 - Información pública
Scope of our review
Our review was limited to the application of the procedures established in International Standard on Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity”, which was adopted as standard review in Argentina through Technical Pronouncement No. 33 of the Argentine Federation of Professional Councils in Economic Sciences as was approved by International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists in making inquiries of Company staff responsible for the preparation of the information included in the financial statements and the application of analytical procedures and other review procedures. This review is substantially less in scope than an audit in accordance of International Auditing Standards, consequently, this review does not allow us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, we do not express any opinion on the financial position, comprehensive income and cash flows of the Company.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim financial statements mentioned in the first paragraph of this report, are not prepared in all material respects, in accordance with IAS 34.
Emphasis of matter paragraph
Without modifying our conclusion we draw attention to the situation explained in Notes 1 and 2 of the interim condensed financial statements as regards the economic and financial position of the Company and its regulatory framework.
Report of compliance with regulations in force
In compliance with regulations in force, we report that:
a) the condensed interim financial statements of the Company, are transcribed into the “Inventory and Balance Sheet” book and, insofar as concerns our field of competence, are in compliance with the provisions of the Commercial Companies Law and pertinent resolutions of the National Securities Commission;
b) the condensed interim financial statements of the company arise from accounting records kept in all formal respects in conformity with legal regulations;
c) we have read the summary of activity, and additional information to the notes of condensed interim financial statements required by section 68 of the Rules of the Stock Exchange of Buenos Aires and article 12 °, Chapter III, Title IV of the regulations of the National Securities Commission on which, as regards those matters that are within our competence, we have no observations to make;
d) atMarch 31, 2017 the liabilities accrued in favor of the Argentine Integrated Social Security System according to the Company’s accounting records amounted to $167,378,616, which were not yet due at that date.
Autonomous City of Buenos Aires, May 10, 2017
PRICE WATERHOUSE & CO. S.R.L.
(Partner) |
C.P.C.E.C.A.B.A. Tº 1 Fº 17 |
Dr. R. Sergio Cravero Public Accountant (UCA) C.P.C.E. City of Buenos Aires T° 265 F°92 |
Supervisory Committee’s Report
To the Shareholders of
Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.)
Introduction
In accordance with the provisions of both section No. 294 of Law No. 19,550 and the regulations of the National Securities Commission (hereinafter “CNV”), we have performed a review of the accompanying condensed interim financial statements ofEmpresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.) (hereinafter “the Company”), which comprise the condensed interim statement of financialposition as of March 31, 2017, thecondensed interimstatement of comprehensive income for the three-month period ended March 31, 2017, and thecondensed interimstatements of changes in equity and cash flows for the three-month period then ended, and selected explanatory notes.
The balances and other information related to fiscal year 2016 and its interim period are an integral part of the aforementioned financial statements and should therefore be considered in relation to those financial statements.
Directors’ Responsibility
The Company’s Board of Directors is responsible for the preparation and presentation of the condensed interim financial statements in accordance with International Financial Reporting Standards, which have been adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), as accounting standards and incorporated by the CNV into its regulations, as such standards were approved by the International Accounting Standards Board. Therefore, the Board of Directors is responsible for the preparation and presentation of the condensed interim financial statements mentioned in the first paragraph in accordance with International Accounting Standard 34 “Interim Financial Reporting”.
Scope of our review
We have performed our review in accordance with current regulations, which require the application of the procedures established in International Standard on Review Engagements ISRE 2410 “Review of interim financial information performed by the independent auditor of the entity”, which has been adopted as review standard in Argentina by Technical Resolution No. 33 of the FACPCE, as such standard was approved by the International Auditing and Assurance Standards Board, and include verification of the consistency of the documents subject to the review with the information on corporate decisions laid down in minutes, and whether such decisions comply with the law and the by-laws as to their formal and documentary aspects. In conducting our professional work, we have examined the work performed by the external auditors of the Company, Price Waterhouse & Co. S.R.L, who issued their auditors’ report on May 10, 2017. A review of interim financial information consists in making inquiries of the Company personnel responsible for the preparation of the information included in the condensed interim financial statements, and in applying analytical and other review procedures.
Supervisory Committee’s Report (Continued)
Scope of our review (Continued)
This review is substantially less in scope than an audit performed in accordance with international auditing standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an opinion on the Company’s condensed interim financial position, condensed interim comprehensive income or condensed interim cash flows. We have not assessed the corporate management, financing, marketing or operating criteria, inasmuch as they are the responsibility of the Board of Directors and the Shareholders’ Meeting.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim financial statements mentioned in the first paragraph of this report, are not prepared, in all material respects, in accordance with International Accounting Standard 34.
Emphasis of matterparagraph
Without modifying our conclusion, we draw attention to the situation detailed in Notes 1 and 2 to the condensed interim financial statements with respect to the Company’s economic and financial situation.
Supervisory Committee’s Report (Continued)
Report of compliance with current regulations
As required by current regulations, we report that:
a) the Company’s condensed interim financial statements have been transcribed to the “Inventory and Balance Sheet” book and, as to matters within our field of competence, comply with the provisions of the Business Organizations Law and the CNV’s applicable resolutions;
b) the Company’s condensed interim financial statements arise from accounting records, which are kept, in all formal aspects, in conformity with legal regulations and maintain the safety and integrity conditions based on which they were authorized by the CNV;
c) the provisions of section No. 294 of Law No. 19,550 have been complied with.
City of Buenos Aires, May 10, 2017.
By the Supervisory Committee |
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José Daniel Abelovich |
Member |